Exclusive Interview: Temel Kotil, Turkish Airlines CEO

It is almost impossible to catch Temel Kotil without a smile. Walking into a room full of journalists at the headquarters of Turkish Airlines in Istanbul, the CEO warmly greets everyone before he begins an energetic and passionate presentation about the phenomenal growth of his company.

Established in 1933 with a fleet of only five aircraft, Turkey’s national airline today boasts 212 planes – passenger and cargo – that fly to 219 destinations around the world. A number, which Kotil hopes, will reach 250 by the end of this year.

“Our target is to have the strongest network in the world, with more destinations than anybody else,” he emphatically states.

But that is just one step towards his main goal: “From my first day as the CEO of Turkish Airlines, my vision was to make it the best airline in the world in all respects,” he tells Gulf Business.

And the ambitious CEO is not ambiguous about it: “We hope to achieve that objective by 2023, which is the centenary of our Republic that was founded in 1923.”

It is undoubtedly not an easy goal to achieve, considering rising oil prices, a sluggish European economy and, very importantly, mounting competition.

But Kotil is unfazed by these issues. “We are competing against ourselves, not others. If we offer cheaper and better services to passengers, they will choose us.”

Looking at figures, it would be hard to dispute the carrier’s popularity.

Along with increasing its fleet and the destinations, Turkish Airlines, a member of the global Star Alliance, has also seen its passenger numbers, and, crucially, revenues, grow.

The airline carried 39 million passengers in 2012, a 20 per cent rise compared to 2011. It further aims to boost annual passengers numbers to 46 million this year and 90 million by 2020, while also upping flight services to 2,000 per day from around 1,000 per day currently.

“We can do much more, but we are smart, and with my heart and mind telling me to stop there, we will stop at 90 million passengers per year,” he says.

NUMBER CRUNCH

The company recently announced an extraordinary jump in 2012 net profit to reach 1.13 billion TL ($632 million), up from 19 million TL ($11 million) in 2011. Sales revenues increased by 26 per cent to 14.9 billion TL, while operating profit shot up by a whopping 192 per cent to 1.04 billion TL.

Turkish Airlines added 32 new routes in 2012, with available seat kilometre rising 18 per cent and revenue per kilometre increasing 26 per cent year-on-year.

Kotil hopes to earn an estimated $9.74 billion in revenue this year and proudly adds that the airline has posted consecutive profit in the last 10 years.

“Our growth objective is to strengthen seat numbers and fleet, while cutting our costs. We have kept our costs unchanged over the last few years and they are much lower than the competition. For one, our labour costs are not high, and we also make use of the latest technology to improve efficiency,” he says.

In its 2013 forecast released in March, the International Air Transport Association (IATA) estimated the global airline industry to post a combined net profit of $10.6 billion this year, up from $8.4 billion in December.

“Stronger revenues are the main reason for this upgrade, due mostly to higher air travel volumes and a return to (modest) growth in air freight, but also because yields are no longer expected to fall,” stated the report.

However, the association also forecasts operating costs to rise by $9-10 billion, mainly due to higher crude oil and jet fuel prices.

“We now expect the fuel bill to rise to $216 billion this year, which represents 33 per cent of operating costs,” it said.

According to Kotil, labour costs currently account for around 21 per cent of THY’s total costs, new aircraft for nine per cent, food costs amount to five per cent, and the biggest chunk, accounting for 40 per cent of expenditure, is fuel.

But in his characteristic way of dismissing challenges, he says they are equipped to counter rising fuel prices.

“We are preparing our strategies to address the fuel price-rise concerns and our plans take into consideration the worst-case scenario.

“Optimising costs and resources is our way of life at Turkish Airlines – wasting is against our culture. The economies of scale that we work on will be more operative thanks to our new aircrafts, as our production costs will decrease.

“We will not face any problem as we will always follow this strategy,” he states.